The property boom has forced many first time buyers to keep renting and so boosted the buy-to-let market, according to the mortgage lender, Paragon Mortgages.

May’s Buy-to-Let Index from Paragon Mortgages shows that the buy to let market remains healthy, with yields, income and landlord property values all stabilising this month.

And figures from the Council of Mortgage Lenders (CML) have revealed that the proportion of general UK mortgage lending accounted for by first time buyers has fallen to an all-time low. The buy-to-let market has filled the void left by first-time buyers as landlords purchase properties to rent out.

A slowing residential market has also helped to keep yields stable, as landlords are continuing to find bargain properties. While the Halifax and Nationwide Building Society house price indices have reported over 4% house price inflation so far this year, the latest Paragon Mortgages survey provides further evidence that landlords are obtaining better priced deals.

Average yields for England and Wales were 7.97% in April, up slightly from a low of 7.91% in January this year.

Average landlord property prices were £109,669, down slightly from a peak of £111,997 in January this year and over the past 12 months landlord property prices have seen 19.4% inflation. Rental incomes have been stable over the past year averaging £8,750 per annum.

John Heron, Managing Director of Paragon Mortgages, comments:

“This month we’re seeing a clear stabilisation of yields and rental values as landlords benefit from an easing of property prices as more properties come onto the market.”

“It confirms what we’ve been saying that buy-to-let as a business remains steady and that there is sustained demand for decent private rented accommodation in all parts of the country. Despite what some people are saying, buy-to-let is not set for a tumble – there is no bubble and there’s nothing to burst.”

There is a clear north-south divide - highest yields are attainable in the north of the country where properties are cheapest:

• North (10.08%; £56,937)
• Yorkshire (10.13%; £66,760)
• North West (9.75%; £69,345)
• Wales (8.64%; £81,511)

Lowest yields are seen in the south, where properties are the most expensive:

• Greater London (6.84%; £194,335)
• South East (7.41%; £132,721)
• East Anglia (7.68%; £90,565)
• South West (7.98%; £125,061)

Terraced properties are the best investment achieving the highest annual rental yields (9.25%) and are the least costly form of investment (£80,016). Semi detached houses are the next best property by type of house for yields (8.36%). Flats generally give the worst yields (7.48%) and whilst detached houses are clearly the most costly form of investment (£142,396), they offer better yields than flats (7.70%).

Wales and East Anglia are best regions for investments, taking into account both property value appreciation and rental income over the year, Wales provides the highest overall return (61% total return), followed by the East Anglia (44%). Yorkshire and the North offered the lowest total returns of 5% and 16% respectively. Nationally, the average total return was 28.88%, equivalent to £26,533 gross.